IORP II

What is IORP II?

IORP II is an EU Directive that set new requirements for occupational pension schemes. The legislation for this was passed into law in April 2021 in Ireland. It resulted in increased requirements of pension scheme trustees.  Without significant changes, pension schemes won’t meet these requirements. The enhanced administration, increased governance and ultimately the substantial cost to schemes means alternative options are worth considering for trustees and members.  

If you want more detailed information about these regulatory requirements, you can refer to Your guide to IORP II. 

This page outlines information relevant to group pension schemes, with either 1 member or with multiple members.

Information for trustees

It’s important to keep member’s best interests in mind. You can choose from the options outlined below.  

1. Maintain the current scheme and take the necessary steps to become IORP II compliant. If this is the case then you must be compliant with IORP II Directive since 1 January 2023.  

2. If you don’t want to accept the additional responsibilities and costs associated with being IORP II compliant you can choose to wind up the existing scheme and transfer or assign the member’s policies to an alternative arrangement. The alternative options for schemes winding up include:

•  Transfer to another occupational pension scheme (including a master trust from another provider)
•  Transfer to a Personal Retirement Savings Account (PRSA) 
•  Transfer to a Buy Out Bond (BOB) 
•  Retirement, if circumstances are right 
•  Assignment of the existing policy to the member 

Assign to the member

Assigning a policy simply means transferring the ownership to another person. The policy owner is currently the trustee, but once assigned, each member becomes the policy owner for their own policy. After the assignment, policies are treated like buy out bonds. 

If the assign to member option is chosen contributions to the scheme’s policies must stop, if they are currently receiving contributions, and cannot be restarted in the future. 

If members wish to continue saving for their retirement, a new pension arrangement will need to be put in place for future contributions. 

This option can be used for schemes invested in unit-linked investments, and those invested in with-profits.  

Why it may be appropriate for with-profits investments 

For members invested in with-profits, it allows accrued funds to remain invested in their current with-profits fund(s) and does not impact on any investment guarantees* those funds may have. 

A unit price adjustment (UPA) is an adjustment factor which is usually applied to a member’s fund if they leave the scheme before the normal retirement age or in the event of a scheme wind up. This solution allows the current scheme to wind up and assign the policy to the member with no UPA applied. 

*Some with-profits funds have potentially valuable guarantees, provided the member meets the terms of their policy. However, if the member transfers their policy to an alternative arrangement (either before or after the assignment takes place) before their normal retirement date, they would lose these guarantees. 

Important considerations for Trustees, Employers and Members before choosing an option  

It’s important that you consider all options available to the scheme and discuss them with a financial adviser to make the best decision for the member. For schemes which are currently paying contributions to member’s policies, there are some important considerations if you choose to wind up the existing scheme and transfer or assign the member’s policy(s) to an alternative arrangement:  

If the member wants to continue to save for retirement, they’ll no longer be able to invest future contributions to their current policy or in Standard Life with–profits as these funds are no longer available to new investments so they’ll need to consider the cost of setting up a new policy, including ongoing charges, as well as the fund choice available to them.  

Some policies may have additional risk benefits, such as disability benefit, premium protection or life cover which will stop once contributions to the current policy cease. If trustees or members want to have these in place, they will need to set up a new plan before stopping contributions to the current policy. Trustees should speak with the member and the employer about what this means, if they want to avail of these features, if they can get cover elsewhere and the cost of setting up an alternative policy.  Any new policy will require details of the member’s health before providing cover and their age is also an important factor as it can impact on the availability and cost of cover open to the member. Standard Life no longer provides these type of policies.  

Next steps to assign the policy to the member

If you decide to assign the policy to the member, you’ll need to select the downloadable documents pack below. Trustees have been sent a copy of the relevant pack by post.

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Assigning the policy to the member  

If having considered all the options available you’ve decided, together with the scheme employer and your financial adviser, you’d like to assign the policy to the member we’ve put together tailored documents to help you with this unfamiliar process. You’ll find them in the downloadable packs linked above.

Here's what you'll need to do: 

1.  Read the ‘Assigning a policy to a scheme member’ guide for more detailed information and to make sure you’re still satisfied this is the right option for your scheme.
      
2.  Complete the documents in the pack relevant to your scheme, following the instructions in the pack. Everything you need is in the pack. 
   
   For the assignments to take place, Standard Life will need contact information including correspondence address for each member. You can either provide that within the downloadable packs or complete this online form and return to customerservice@standardlife.ie, making sure to include the scheme number. 
   
   You must have obtained or confirmed the correspondence address for the members within the last six months.

You can return the relevant documents to us by post to Standard Life, 90 Stephens Green, Dublin D02 F653 or by emailing customerservice@standardlife.ie 

Although the decision on how to comply with IORP II lies with the trustee, members and employers affected by this decision may wish to stay informed too.